
Explanation:
Basic Load Balancer: Backend pool endpoints for Virtual machines in a single availability set or virtual machine scale set.
Subnet12 association will be used to assign an IP for the internal load balancer, not to load balance the VMs in the Subnet.
Box 1: Yes
VM1 and VM are in the Availability Set.
Box 2: No
Both VMs are not part of any Availability Set or Scale Set.
Box 3: No
Both VMs are not part of any Availability Set or Scale Set.
Reference:
https://docs.microsoft.com/en-us/azure/load-balancer/skus